Federal authorities seized LibertyReserve.com and four other related domain names, effectively shutting down the site. The site’s founder, Arthur Budovsky Belanchuk (who apparently renounced his US citizenship in 2011 to become a Costa Rican citizen), was arrested last Friday.

In a 27-page indictment (PDF), the defendants are charged with money laundering and conspiracy to operate unlicensed money transmitting business. They are ordered to surrender "all property, real and personal” including: “at least $6 billion” and tens of millions of dollars more allegedly contained within bank accounts across Costa Rica, Cyprus, Russia, Hong Kong, Morocco, China, Spain, Latvia, and Australia.

Attempts to reach Liberty Reserve via phone and e-mail were not immediately successful.

Prosecutors labeled Liberty Reserve as a “criminal business venture, one designed to help criminals conduct illegal transactions and launder the proceeds of their crimes.” The indictment also noted that the site was “a financial hub of the cyber-crime world, facilitating a broad range of online criminal activity, including credit card fraud, identity theft, investment fraud, computing hacking, child pornography, and narcotics trafficking.”

Liberty Reserve is believed to have more than a million users worldwide, including more than 200,000 in the United States alone. According to the indictment, the company processed more than 12 million transactions annually “and is believed to have laundered more than $6 billion in criminal proceeds” between 2006 and May 2013.

Collateral damage

However, as in 2012’s seizure and shuttering of Megaupload, there are likely a large number of users that had legitimate assets seized through Liberty Reserve, even if many others were using it for nefarious purposes.

Mitchell Rosetti is the co-founder of ePay Cards—a company that issues “virtual” Visa and MasterCard numbers to people around the world who don’t have access to traditional banking services. ePay Cards accepts payment via Western Union, Moneygram, or Liberty Reserve, and after taking a fee, it issues a “virtual card.” A $100 Visa card, for example, would cost a customer $118. But Rosetti told Ars that “70 percent” of the company’s business came via Liberty Reserve and that the company is now at serious risk of collapsing.

“We are now looking for alternative methods of payment,” he said. “We have not emitted any real quantity of cards since Friday. Further, our monies were seized. Liberty Reserve had $28,000 of ours. We have not yet investigated that situation. Given that this happened on Friday, it’s unraveling today. We’re looking at all of our options.”

Rosetti added that his typical customers were “unbanked” and lived in Latin America, Southeast Asia, or sub-Saharan Africa. They often would use these prepaid Visa accounts to pay for various online services, such as items on Google Play or Facebook.

“For my customers, given the low amount that we take, it wasn’t a concern [that people would use our company for fraudulent purposes],” he said. Rosetti added his company hasn't been contacted by any federal agency, and he hasn't retained the services of an attorney to try to regain his company’s money. He went on to detail more about his company's mission and why it's unfair to lump ePay Cards in within potential fraudulent Liberty Reserve users:

Rarely have we had individuals that will send us $2,000. If something like that would happen, every red flag would go up. That could be a year’s income in some nations. My customer is someone who is unbanked and lives in Chile, Argentina, or Peru and doesn’t make that much money. So why is this individual coming to us? We practiced Know Your Customer practices. I can tell you what my customers were transferring to me: $15, $23, $38. It goes up to $300. But up there it costs you [$35 or $40]—we did that on purpose to dissuade you to load that much money. Why aren’t you doing this through a bank?

We’re not venture-backed. Whatever was lost came out of my pocket at this point. And it hurt. It hurts to be associated—they had millions of customers. I know for a fact that there’s a lot of people using this for Web hosting. Being put into this group of pedophiles and drug kingpins—it’s not a nice thing.

Jennifer Queliz, a spokesperson for United States Attorney’s Office for the Southern District of New York, told Ars that persons or companies who believe they are in a situation similar to ePay Cards can call (888) 238-0696 or (212) 637-1583 for more information.

I don't recall non illegal users of mega upload getting back their subscription fee. This is a much larger amount however, but i still feel the Feds could care less. It would be a pleasent surprise if that's not the case.

So we have a $6 billion money laundering operation getting whatever's coming to them, but the real story is the guy who lost some $28k in a random business venture because he decided to do his banking with a man who renounced his citizenship and set up shop in Costa Rica (edit: AFTER BEING CONVICTED OF MONEY LAUNDERING ONCE BEFORE)?

Mr. Rosetti's claims seem questionable. Why are 70% of people who are '“unbanked” and lived in Latin America, Southeast Asia, or sub-Saharan Africa' paying with digital currency? Am I missing something?

Your confusion confuses me. They don't have Visa/MC credit or debit cards. Yet they still might want to purchase something online. Usually this is accomplished via gift cards in the states. IE Prepaid WOW cards for "unbanked" minors. The concept here is similar.

I don't care if he gets fired for discrimination against the teabags, just please fire Eric Holder. Guy is mental. I can't take much more of this Clinton era dinosaur attempting to burn the tech industry he fails to comprehend because he's mad about his Facebook IPO losses.

Apparently this isn't the first time he's ran into trouble with the law. A similar previous service he ran was shut down in 06; he eventually pled down to probation before fleeing the country. Liberty Reserve was denied a business license in Costa Rica two years ago and was formally shut down as a result; but he kept playing games to keep it open.

Not that the Feds are crusaders of rightness or anything, not even close, but these guys were guilty as fuck.

No tears here, this isn't some innocent victim. Sometimes the Feds brings down the hammer, and it's totally justified. Sometimes ... like this time for instance.

I think people don't have a problem with Liberty Reserve getting hammered, exactly, it's either/both of the collateral damage and the fact that other, larger companies have more or less gotten away with it.

Not that the Feds are crusaders of rightness or anything, not even close, but these guys were guilty as fuck.

No tears here, this isn't some innocent victim. Sometimes the Feds brings down the hammer, and it's totally justified. Sometimes ... like this time for instance.

Why should US law apply to people and companies outside the US?

Because he's doing business in the US. If he didn't issue pseudo-debit cards denominated in USD and usable anywhere the US banking system accepted plastic then the jurisdiction claim could be disputed.

Because he's doing business in the US. If he didn't issue pseudo-debit cards denominated in USD and usable anywhere the US banking system accepted plastic then the jurisdiction claim could be disputed.

First, it's an extreme stretch to say anyone doing business with those in the US, even if the business is located elsewhere, is in US jurisdiction - I find it ridiculous, although the US routinely gets away with forcing such an expanded notion of jurisdiction on other countries by throwing around its weight. Also, how the hell does using US dollars put you in the US's jurisdiction? If one person gives another person dollars and neither is in the US, the US should have absolutely no say over that.

Mr. Rosetti's claims seem questionable. Why are 70% of people who are '“unbanked” and lived in Latin America, Southeast Asia, or sub-Saharan Africa' paying with digital currency? Am I missing something?

Not that the Feds are crusaders of rightness or anything, not even close, but these guys were guilty as fuck.

No tears here, this isn't some innocent victim. Sometimes the Feds brings down the hammer, and it's totally justified. Sometimes ... like this time for instance.

Why should US law apply to people and companies outside the US?

Because ...

Costa Rican authorities raided suspect´s home and offices in San José and Heredia.

Arthur Budovsky Belanchuk, 39, on Friday was arrested in Spain as part of a money laundering investigation performed jointly by police agencies in the United States and Costa Rica.

Costa Rican prosecutor José Pablo González said Budovsky, a Costa Rican citizen of Ukrainian origin, has been under investigation since 2011 for money laundering using a company he created in the country called Liberty Reserve.

SEE ALL THOSE WORDS UP THERE? SEE ALL THE ONES THAT LOOK LIKE ANOTHER COUNTRY CALLED "COSTA RICA"? THEY LOOK LIKE THAT BECAUSE THEY REFER TO ANOTHER COUNTRY CALLED COSTA RICA.

Costa Rican authorities raided suspect´s home and offices in San José and Heredia.

Arthur Budovsky Belanchuk, 39, on Friday was arrested in Spain as part of a money laundering investigation performed jointly by police agencies in the United States and Costa Rica.

Costa Rican prosecutor José Pablo González said Budovsky, a Costa Rican citizen of Ukrainian origin, has been under investigation since 2011 for money laundering using a company he created in the country called Liberty Reserve.

SEE ALL THOSE WORDS UP THERE? SEE ALL THE ONES THAT LOOK LIKE ANOTHER COUNTRY CALLED "COSTA RICA"? THEY LOOK LIKE THAT BECAUSE THEY REFER TO ANOTHER COUNTRY CALLED COSTA RICA.

The article mentions US law enforcement involvement and that the US seized the domain names and makes it sound like he was arrested for violating US law. That's why I assumed that the US was the one leading the charge.

Costa Rican authorities raided suspect´s home and offices in San José and Heredia.

Arthur Budovsky Belanchuk, 39, on Friday was arrested in Spain as part of a money laundering investigation performed jointly by police agencies in the United States and Costa Rica.

Costa Rican prosecutor José Pablo González said Budovsky, a Costa Rican citizen of Ukrainian origin, has been under investigation since 2011 for money laundering using a company he created in the country called Liberty Reserve.

SEE ALL THOSE WORDS UP THERE? SEE ALL THE ONES THAT LOOK LIKE ANOTHER COUNTRY CALLED "COSTA RICA"? THEY LOOK LIKE THAT BECAUSE THEY REFER TO ANOTHER COUNTRY CALLED COSTA RICA.

The article mentions US law enforcement involvement and that the US seized the domain names and makes it sound like he was arrested for violating US law. That's why I assumed that the US was the one leading the charge.

My apologies for the caps lock and the crap tone of my post.

And I see your point - the article does lead with "Feds smash Liberty", making the immediate and misleading impression that the feds acted on their own or had the lead role. But that's just Cyrus being Cyrus - always using a blowtorch when what's needed is a flashlight.

Mr. Rosetti's claims seem questionable. Why are 70% of people who are '“unbanked” and lived in Latin America, Southeast Asia, or sub-Saharan Africa' paying with digital currency? Am I missing something?

Yes. Here in the US, you can walk in to a 7-11 and buy a Google Play gift card. I imagine it's a little harder in Argentina or Chile. Instead, Liberty will have deals with store chains, and you can walk in and buy a "gift card" that gives you so much money worth of Liberty money, BitCoin, or probably one of a few other currencies. You'll probably pay a good 10% for the privilege, too. Then you'll turn around and use that money to fund your debit card (with another 10-15% hit) and use THAT money to buy music from iTunes or an app from Google Play.

With all those fees on top, it's probably still cheaper than Western Union.

Because ... Costa Rican authorities raided suspect´s home and offices in San José and Heredia.Arthur Budovsky Belanchuk, 39, on Friday was arrested in Spain as part of a money laundering investigation performed jointly by police agencies in the United States and Costa Rica.Costa Rican prosecutor José Pablo González said Budovsky, a Costa Rican citizen of Ukrainian origin, has been under investigation since 2011 for money laundering using a company he created in the country called Liberty Reserve.SEE ALL THOSE WORDS UP THERE? SEE ALL THE ONES THAT LOOK LIKE ANOTHER COUNTRY CALLED "COSTA RICA"? THEY LOOK LIKE THAT BECAUSE THEY REFER TO ANOTHER COUNTRY CALLED COSTA RICA.The Costa Rican police arrested him under Costa Rican law. Read something sometime, it's linked in the article ffs.

The article mentions US law enforcement involvement and that the US seized the domain names and makes it sound like he was arrested for violating US law. That's why I assumed that the US was the one leading the charge.

My apologies for the caps lock and the crap tone of my post. And I see your point - the article does lead with "Feds smash Liberty", making the immediate and misleading impression that the feds acted on their own or had the lead role. But that's just Cyrus being Cyrus - always using a blowtorch when what's needed is a flashlight.

Thank you for readdressing your post. I was going to point out that there was a US indictment which included US money laundering and conspiracy charges. "Because virtually all of LIBERTY RESERVE's business derived from suspected criminal activity" [Indictment #10].http://www.justice.gov/usao/nys/pressre ... ctment.pdf

This seems like an air tight case. BS! This is a war on personal Liberty to transact business in anonymity. If there were claims of fraud or theft against Liberty Reserve, that's one thing. This is show of force to the likes of Bitcoin and others that unregulated currency will not be tolerated. The Costa Rican government saw an opportunity to seize funds and solicited the USA's muscle to steal money. Wait... isn't that a conspiracy? Its okay when governments do it.

Not that the Feds are crusaders of rightness or anything, not even close, but these guys were guilty as fuck.No tears here, this isn't some innocent victim. Sometimes the Feds brings down the hammer, and it's totally justified. Sometimes ... like this time for instance.

Guilt of what? "Because virtually all of LIBERTY RESERVE's business derived from suspected criminal activity" [Indictment #10].http://www.justice.gov/usao/nys/pressre ... ctment.pdf18 USC § 1956 - Laundering of monetary instruments(a)(1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity—(A)(i) with the intent to promote the carrying on of specified unlawful activity; or(ii) with intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986; or(B) knowing that the transaction is designed in whole or in part—(i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or(ii) to avoid a transaction reporting requirement under State or Federal law,shall be sentenced to a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both. For purposes of this paragraph, a financial transaction shall be considered to be one involving the proceeds of specified unlawful activity if it is part of a set of parallel or dependent transactions, any one of which involves the proceeds of specified unlawful activity, and all of which are part of a single plan or arrangement.(2) Whoever transports, transmits, or transfers, or attempts to transport, transmit, or transfer a monetary instrument or funds from a place in the United States to or through a place outside the United States or to a place in the United States from or through a place outside the United States—(A) with the intent to promote the carrying on of specified unlawful activity; or(B) knowing that the monetary instrument or funds involved in the transportation, transmission, or transfer represent the proceeds of some form of unlawful activity and knowing that such transportation, transmission, or transfer is designed in whole or in part—(i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or(ii) to avoid a transaction reporting requirement under State or Federal law,shall be sentenced to a fine of not more than $500,000 or twice the value of the monetary instrument or funds involved in the transportation, transmission, or transfer, whichever is greater, or imprisonment for not more than twenty years, or both. For the purpose of the offense described in subparagraph (B), the defendant’s knowledge may be established by proof that a law enforcement officer represented the matter specified in subparagraph (B) as true, and the defendant’s subsequent statements or actions indicate that the defendant believed such representations to be true.(3) Whoever, with the intent—(A) to promote the carrying on of specified unlawful activity;(B) to conceal or disguise the nature, location, source, ownership, or control of property believed to be the proceeds of specified unlawful activity; or(C) to avoid a transaction reporting requirement under State or Federal law,conducts or attempts to conduct a financial transaction involving property represented to be the proceeds of specified unlawful activity, or property used to conduct or facilitate specified unlawful activity, shall be fined under this title or imprisoned for not more than 20 years, or both. For purposes of this paragraph and paragraph (2), the term “represented” means any representation made by a law enforcement officer or by another person at the direction of, or with the approval of, a Federal official authorized to investigate or prosecute violations of this section.(b) Penalties.—(1) In general.— Whoever conducts or attempts to conduct a transaction described in subsection (a)(1) or (a)(3), orsection 1957, or a transportation, transmission, or transfer described in subsection (a)(2), is liable to the United States for a civil penalty of not more than the greater of—(A) the value of the property, funds, or monetary instruments involved in the transaction; or(B) $10,000.(2) Jurisdiction over foreign persons.— For purposes of adjudicating an action filed or enforcing a penalty ordered under this section, the district courts shall have jurisdiction over any foreign person, including any financial institution authorized under the laws of a foreign country, against whom the action is brought, if service of process upon the foreign person is made under the Federal Rules of Civil Procedure or the laws of the country in which the foreign person is found, and—(A) the foreign person commits an offense under subsection (a) involving a financial transaction that occurs in whole or in part in the United States;(B) the foreign person converts, to his or her own use, property in which the United States has an ownership interest by virtue of the entry of an order of forfeiture by a court of the United States; or(C) the foreign person is a financial institution that maintains a bank account at a financial institution in the United States.

h) Any person who conspires to commit any offense defined in this section or section 1957 shall be subject to the same penalties as those prescribed for the offense the commission of which was the object of the conspiracy.

18 USC § 1960 - Prohibition of unlicensed money transmitting businesses(a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both.(b) As used in this section—(1) the term “unlicensed money transmitting business” means a money transmitting business which affects interstate or foreign commerce in any manner or degree and—(A) is operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or a felony under State law, whether or not the defendant knew that the operation was required to be licensed or that the operation was so punishable;(B) fails to comply with the money transmitting business registration requirements under section 5330 of title 31, United States Code, or regulations prescribed under such section; or(C) otherwise involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity;(2) the term “money transmitting” includes transferring funds on behalf of the public by any and all means including but not limited to transfers within this country or to locations abroad by wire, check, draft, facsimile, or courier; and(3) the term “State” means any State of the United States, the District of Columbia, the Northern Mariana Islands, and any commonwealth, territory, or possession of the United States.

This seems like an air tight case. BS! This is a war on personal Liberty to transact business in anonymity. If there were claims of fraud or theft against Liberty Reserve, that's one thing. This is show of force to the likes of Bitcoin and others that unregulated currency will not be tolerated. The Costa Rican government saw an opportunity to seize funds and solicited the USA's muscle to steal money. Wait... isn't that a conspiracy? Its okay when governments do it.

There is no "right to transact business anonymously."

Nearly every monetary transaction there is involves some sort of taxation, which means that it's all recorded, logged, and audited.

Because ... Costa Rican authorities raided suspect´s home and offices in San José and Heredia.Arthur Budovsky Belanchuk, 39, on Friday was arrested in Spain as part of a money laundering investigation performed jointly by police agencies in the United States and Costa Rica.Costa Rican prosecutor José Pablo González said Budovsky, a Costa Rican citizen of Ukrainian origin, has been under investigation since 2011 for money laundering using a company he created in the country called Liberty Reserve.SEE ALL THOSE WORDS UP THERE? SEE ALL THE ONES THAT LOOK LIKE ANOTHER COUNTRY CALLED "COSTA RICA"? THEY LOOK LIKE THAT BECAUSE THEY REFER TO ANOTHER COUNTRY CALLED COSTA RICA.The Costa Rican police arrested him under Costa Rican law. Read something sometime, it's linked in the article ffs.

The article mentions US law enforcement involvement and that the US seized the domain names and makes it sound like he was arrested for violating US law. That's why I assumed that the US was the one leading the charge.

My apologies for the caps lock and the crap tone of my post. And I see your point - the article does lead with "Feds smash Liberty", making the immediate and misleading impression that the feds acted on their own or had the lead role. But that's just Cyrus being Cyrus - always using a blowtorch when what's needed is a flashlight.

Thank you for readdressing your post. I was going to point out that there was a US indictment which included US money laundering and conspiracy charges. "Because virtually all of LIBERTY RESERVE's business derived from suspected criminal activity" [Indictment #10].http://www.justice.gov/usao/nys/pressre ... ctment.pdf

This seems like an air tight case. BS! This is a war on personal Liberty to transact business in anonymity. If there were claims of fraud or theft against Liberty Reserve, that's one thing. This is show of force to the likes of Bitcoin and others that unregulated currency will not be tolerated. The Costa Rican government saw an opportunity to seize funds and solicited the USA's muscle to steal money. Wait... isn't that a conspiracy? Its okay when governments do it.

You might want to dial down the OUTRAGEOUS OUTRAGE and loosen up that tin-foil hat you have on, because I think that it's cutting off the circulation to your brain.

This seems like an air tight case. BS! This is a war on personal Liberty to transact business in anonymity. If there were claims of fraud or theft against Liberty Reserve, that's one thing. This is show of force to the likes of Bitcoin and others that unregulated currency will not be tolerated. The Costa Rican government saw an opportunity to seize funds and solicited the USA's muscle to steal money. Wait... isn't that a conspiracy? Its okay when governments do it.

There is no "right to transact business anonymously."Nearly every monetary transaction there is involves some sort of taxation, which means that it's all recorded, logged, and audited.

Its called the natural right to transact business. Trade has been going on for thousands of years and has until recently been thru bartering or coins. Recorded trade is new and mainly resulted from convenience and not required by the US or any state constitution.[Amendment IX]The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.[Amendment X]The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.Any right not delegated to the feds by the Constitution (which prohibition of anonymous trade is not) possibly reserved for the states (it is not by any US State), therefore retained by the people.